Using restricted-access Census data, a new study examines a quarter-million households on a block-by-block basis to yield new results about the correlation between household attributes and school quality. The researchers find that, conditional on income, households prefer to self-segregate on the basis of both race and education.

“Economists have long been interested in estimating household preferences for school and neighborhood attributes, given their relevance to many central issues in applied economics,” write Patrick Bayer (Duke University and NBER), Fernando Ferreira (University of Pennsylvania), and Robert McMillan (University of Toronto and NBER) in the forthcoming issue of the Journal of Political Economy.

Specifically, while all households prefer to live in higher-income neighborhoods, college-educated households are willing to pay $58 more per month than those without a college degree to live in a neighborhood that has 10 percent more college-educated households. In fact, the researchers find that households without a college degree would actually need compensating to live in a neighborhood with 10 percent more college-educated neighbors.

Similarly, blacks are willing to pay $98 more per month to live in a neighborhood that has 10 percent more black households, compared to a negative willingness to pay on the part of white households to live in a similar neighborhood. Perhaps unsurprisingly, increases in household income and education also lead to a greater willingness to pay for better schools.

By one index released this week, home prices are down 3.2 percent from a year ago. Clear-cut gauges of US home prices only go back through the 1970s, but that decline probably exceeds any price drop since the Depression, except for one year during World War II. Economists say the trend could continue well into next year.

Net worth is falling for millions of families as a result. If consumers, feeling less wealthy, cut back on spending, the risk of a national recession would rise.

Why are home prices declining, when by many measures today's economy is much healthier than that of the 1930s? Basically, the good times for housing ran for so long, and prices rose so fast at the boom's peak, that it was unsustainable.

"This time, the problem with housing is not so much that interest rates became especially high.... It was that house prices became especially high," says Nigel Gault, an economist at Global Insight, a forecasting firm in Lexington, Mass. "What was unusual this time is that we had such a long period without any downturn."

Curiously, it looks like the fall in housing prices is now causing higher interest rates rather than the other way around. The drop in prices makes lenders more reluctant to lend which cuts into demand which causes further drops in prices.

As mortgage lenders tighten underwriting standards and home prices fall, Bank of America analysts estimated that 40% of home buyers who got a mortgage in 2006 probably wouldn't qualify for a home loan now.

Jumbo rates have climbed roughly 40 basis points since the end of July. Homeowners refinancing a $600,000 jumbo mortgage now vs. then face paying $162 more a month.

Meanwhile, rates for superjumbo mortgages (typically more than $1 million) have shot up about 200 basis points over the last several weeks to 8%, says Michael Covino, president of Luxmac Covino & Co. in Tarrytown, N.Y., which provides loans for $750,000 to $40 million.

Outstanding commercial paper fell by $62.8 billion, or 3.1%, in the week ended Wednesday to $1.98 trillion, bringing the total decline in the past three weeks to $244 billion, or 11%, the Federal Reserve reported Thursday.

Such a hit has taken place despite commercial paper's seemingly safe-haven status in lending. "It's kind of like a margin account that businesses use for short-term financing," Arnold said.

While it has been a primary source of funding for corporate mergers and acquisitions, it "can be used for almost anything," said Raymond Benton, a Denver-based adviser who purchases individual bond issues for high net-worth clients. Commercial paper is a generic term for most any short-term corporate borrowing, he added. "It's nothing more than a short-term note that can come due in as little as 30 days or less," Benton said.

Reading this kind of news I'm having a hard time believing we can avoid a recession.

Iraq has failed to meet all but three of 18 congressionally mandated benchmarks for political and military progress, according to a draft of a Government Accountability Office report. The document questions whether some aspects of a more positive assessment by the White House last month adequately reflected the range of views the GAO found within the administration.

The GAO claims that attacks against civilians have not lessened.

The draft provides a stark assessment of the tactical effects of the current U.S.-led counteroffensive to secure Baghdad. "While the Baghdad security plan was intended to reduce sectarian violence, U.S. agencies differ on whether such violence has been reduced," it states. While there have been fewer attacks against U.S. forces, it notes, the number of attacks against Iraqi civilians remains unchanged. It also finds that "the capabilities of Iraqi security forces have not improved."

"We declare the freezing of the Mahdi Army without exception in order to rehabilitate it in a way that will safeguard its ideological image within a maximum period of six months," Sheik Hazim al-Araji, a top aide to Sheik al-Sadr, said in a statement read on Iraqi television.

The announcement comes in a week in which intense street battles in the Shi'ite holy city of Karbala killed more than 50 people. Authorities blamed the fighting on intra-Shi'ite rivalries between the Mahdi Army and other militias, principally the Badr Brigade, for the control of key mosques and other sites in the city.

Sadr can try to declare a ceasefire. But the members of his militia might need to keep fighting the Badr Brigade and other militias just in order to stay alive. Also, some of the breakaway factions of the Mahdi Army are no longer taking orders from Sadr and his ceasefire won't stop them.

The reports about Iraq generated by organs of the US government matter less at this point than do the decisions of Shiite militia factions battling each other for control of towns and industries in Iraq.

Household income crept higher and the poverty rate edged lower last year, the government said Tuesday, while the number of Americans without health insurance rose by 2.2 million to 47 million people.

Median household income rose 0.7 percent to $48,200, adjusted for inflation, the Census Bureau reported. But more people had to be at work in each household to get there.

That's because median earnings for individuals working full-time year-round actually fell for the third consecutive year. For men, earnings slipped 1.1 percent to a median of $42,300, while for women, earnings sank 1.2 percent to a median of $32,500.

Whites,. who earn more than blacks and Hispanics, are a dwindling portion of the US population. So this stagnation in median income isn't too surprising.

The slight improvements in household income and a drop in the poverty rate came during a period of job growth, particularly toward the end of 2006, and declining inflation as a result of falling oil prices. But in 2007, the economy has begun weakening because of the national housing slump, and inflation has jumped. The average wage peaked at $17.52 an hour in February and has since fallen, according to Labor Department data.

More than half of all household income was earned by the wealthiest 20% of the population, with incomes above $97,000. Only 3.4% was earned by the bottom fifth, with incomes below $20,000. The median household income remained 2.1% below its pre-recession peak in 1999.

The median household income last year was still about $1,000 less than in 2000, before the onset of the last recession. In 2006, 36.5 million Americans were living in poverty — 5 million more than six years before, when the poverty rate fell to 11.3 percent.

And what is perhaps most disturbing is that it appears this is as good as it’s going to get.

Sputtering under the weight of the credit crisis and the associated drop in the housing market, the economic expansion that started in 2001 looks like it might enter history books with the dubious distinction of being the only sustained expansion on record in which the incomes of typical American households never reached the peak of the previous cycle.

The bureau's poverty rate measures a snapshot in time. Some experts say that focus masks a significant increase in economic instability for Americans that makes more people in the middle class vulnerable to poverty. That's because while the percentage of people in poverty at a given time may be declining (it's fluctuated between 10 and 15 percent for the past 20 years), more Americans overall are experiencing poverty at some time during their lives than at any time during the past 30 years, according to a study done at Washington University in St. Louis.

The study found that in the 1970s, about 24 percent of people between the ages of 20 and 29 experienced poverty for a year or more. In the 1980s, that went up to 30 percent. And in the 1990s, it increased to 38 percent. The reasons, according to Mark Rank, one author of the study, are the increase in lower-paying jobs, employment insecurity, and significant decreases in health-insurance coverage.

BAGHDAD, Aug. 28 — Despite a stepped-up commitment from the United States to take in Iraqis who are in danger because they worked for the American government and military, very few are signing up to go, resettlement officials say.

The reason, Iraqis say, is that they are not allowed to apply in Iraq, requiring them to make a costly and uncertain journey to countries like Syria or Jordan, where they may be turned away by border officials already overwhelmed by fleeing Iraqis.

George W. Bush needs to stand up and demand that Iraqis stay in Iraq to help fight the terrorists and to help rebuild the Iraqi economy. We need those Iraqis in Iraq so they can volunteer for the Iraqi police, Iraqi Army, and the Iraqi Interior Ministry security forces. They need to be made to fight for freedom and democracy whether or not they favor freedom or democracy.

Bush wants us to believe good times are around the corner. If that is true then there's no need for the US to be burdened by a big Muslim refugee immigrant population from Iraq.

What I want to know: Why should we have US soldiers fighting and dying for the Iraqi people while we also let the Iraqis leave rather than stay and support the Iraqi government? We should oppose a large Iraqi refugee settlement into the United States. We should keep Muslims separated from the rest of the world. Islam is the problem. We should keep the problem out of our civilization.

NEW YORK -- The deliverymen of Saigon Grill labored for years at the bottom of Manhattan's food chain. Biking swiftly down the avenues in biting cold and searing heat, they schlepped up high-rises and walk-ups with bags of steaming noodles and shrimp fried rice.

Then they surprised their bosses -- and others in this seen-it-all town -- by serving up something unexpected: a revolt.

The 30 men -- all immigrants, including undocumented workers frustrated with the poor conditions and low wages that are often a fact of life in America's underground economy -- banded together in an effort to unionize. They demanded an end to what they say were salaries less than half the minimum wage, and to penalties that included $20 fines for late deliveries and $50 for shutting the restaurant's glass doors with a bang.

How about some labor law enforcement against a restaurant that will pay less than minimum wage? How about immigration law enforcement with deportation for these illegals?

The Washington Post refer to illegal aliens by the Orwellian left-liberal term "undocumented immigrants". They haven't been documented yet.

But the number of immigrants, documented and undocumented, represented by unions surged to 2 million last year, up from 1.6 million in 1996, according to a study by the Washington-based Migration Policy Institute that is scheduled for release next week. By comparison, the number of union-represented U.S.-born citizens dropped to 14.8 million last year, down from 16.5 million in 1996, the study said.

Undocumented? So if the US government identified them all and wrote their names on documents that listed them all as illegal aliens who should be deported would the Post start referring to them as documented? Not unless that meant they gained the legal right to stay here.

Basra, Iraq - The last contingent of British soldiers based in the center of this southern city will leave by Friday, says a senior Iraqi security official, adding that a deal has been struck with leaders of Moqtada al-Sadr's Mahdi Army to ensure their safe departure.

As they pull back to a base outside Basra, the British will leave a vital provincial capital in the throes of a turf battle between Shiite factions – one that Mr. Sadr's militia appears to be winning.

Is Sadr on a roll, headed for rule over the Shia zone in Iraq? Or will his militia fragment as soon as they near total dominance?

The Iraqi "central" government (i.e. the Green Zone government that the US continues to back) is going to try to take over once the Brits leave. But the Mahdi guys seem like they have the numerical advantage.

The Iraqi official says the palaces will be handed over to an Iraqi force dispatched from Baghdad and will not be given to the controversial provincial authority, which is embroiled in a power struggle between rival Shiite political parties. This 3,000-strong Iraqi force will consist of two Army battalions and elements from the Ministry of Interior's commando unit.

The Mahdi Army, which according to one estimate, numbers about 17,000 in Basra and is divided into about 40 sariyas (company-size military unit), is the strongest among its rivals in the militia-infiltrated police force and it has influence over vital sectors such as health, education, power distribution, and ports.

In part, of course, Iraq remains a place pocked by violence and fear, which makes compromise difficult. But more important, say Iraqi political commentators and officials, Iraq has become a cellular nation, dividing and redividing into competing constituencies that have a greater stake in continued chaos than in compromise.

In most areas, for most Iraqis, the central government today is either irrelevant or invisible. Provinces and even neighborhoods have become the stages where power struggles play out. As a result, Shiites, Sunnis and Kurds — or elements of each faction — have come to feel that they can do a better job on their own.

When I refer to the central government as the "Green Zone government" I'm only partly exaggerating. It has little influence over large swathes of Iraq. Even the central government is broken up into factions with different ministries under the control of different parties and militias.

The overstretched US military can lower Iraqi deaths in limited areas. But the US military can't maintain its current level of deployment in Iraq. Some time in 2008 US forces are going to go way down. Then what happens?

What could change by the time US forces start go withdraw? More thorough ethnic purging. The fewer Shias and Sunnis living near each other will mean fewer opportunities to kill each other. Also, the local competition between militias might resolve with clear winners. Less competition for control should also lower the level of violence.

Of course, an ethnically purged nation dominated by regional militias isn't the vision that the Bush White House wants us to imagine Iraq is headed for. But if Iraq continues to head in that direction and the violence drops we can expect the Bush White House to mendaciously claim credit for the drop in violence. Will our leaders then lie their way out of Iraq declaring success the whole way? Tricky Dick "Peace With Honor" Nixon would approve.

The Fairfax County school system for the first time failed to meet academic goals under the No Child Left Behind Act, largely because many students with limited English skills struggled on reading tests that were given in response to a federal order, according to school officials and scores released yesterday.

Several other well-regarded Northern Virginia systems, including those in Alexandria and in Loudoun, Prince William and Arlington counties, also fell short of target scores on last spring's Standards of Learning tests. The number of Northern Virginia schools that did not make the grade nearly doubled, rising from 76 in 2006 to 146 this year.

Fueled by an explosion of jobs attracting immigrants to the nation's suburbs, the percentage of minorities has dramatically increased in six local counties -- including Prince William, where the share of minorities grew from 35 percent in 2000 to 48 percent in 2006, according to census estimates to be released today.

Resolutions to deny a potentially wide range of public services to illegal immigrants have thrust two northern Virginia counties into America's immigration debate. The measures passed in July in Prince William and Loudoun counties join a flurry of recent efforts by local governments across the United States that believe the federal government has not done enough to stop illegal immigration.

But while other jurisdictions have focused largely on landlords and employers who knowingly rent to and hire illegal immigrants, the Virginia resolutions take a more direct approach. The National Association of Counties says the two counties are the first it knows of to pass measures aimed at denying services.efforts.

When the people of California passed an initiative to do this a liberal-packed federal court threw out the will of the people and told them they have to be good sheeple victims. So the white flight out of California accelerated.

A delegate from Prince William County said this week that he will introduce a bill that would cut off state funding to local governments that fail to check the immigration status of residents who get public assistance.

Del. Jeffrey M. Frederick (R) said the legislation would toughen a 2005 Virginia law that forbids local governments to provide some social services to illegal immigrants. He plans to call for every county, city and town to prove its compliance with the law by adopting policies similar to those proposed in Prince William and Loudoun County, which voted this summer to deny services to illegal immigrants and step up law enforcement efforts against them.

Anne Arundel County, the latest Washington area jurisdiction to take a new and public position against illegal immigration, has announced that businesses with county contracts will be required to sign affidavits attesting that they do not employ workers who are in the country illegally.

SPOTSYLVANIA -- Officials in this booming county voted unanimously yesterday to find out how many people here are illegal immigrants and determine what services can be denied to undocumented residents.

"We should find out exactly what is going on in our county," said Spotsylvania County Board of Supervisors Chairman Chris Yakabouski, who proposed the action.

Counties all over the United States are going to copy the actions of these Virginia counties. State and local government actions against illegal aliens boost the pressures on the Congress and the Executive branch to deport illegals and to stop more from entering illegally.

This seems like a good time to develop labor-saving devices for jobs done by low skilled manual laborers. The supply of low skilled labor is at least going to grow more slowly and might even shrink for a while.

An anti-illegal immigrant group is circulating a petition aimed at pressuring Virginia agencies, including the state police, to enter a controversial program with federal authorities to speed the deportation of illegal immigrants. Under the program, called 287(g), the U.S. Immigration and Customs Enforcement, trains local law enforcement to initiate deportation proceedings for criminal illegal aliens.

State and local police ought to be able to pick up illegals and turn them over to ICE for deportation.

If you would have asked the Bush White House back in February of 2007 if an increase in the number of US troops in Iraq would have sped up or slowed down the ethnic cleansing and partitioning of Iraq I'm sure the Bushies would have said their next big plan would slow down the ethnic cleansing. After all, the ethnic cleansing involves killings and forcing of people to flee from their homes. Yet during the surge the flight of Shias and Sunnis away from each other has accelerated.

BAGHDAD, Aug. 23 — The number of Iraqis fleeing their homes has soared since the American troop increase began in February, according to data from two humanitarian groups, accelerating the partition of the country into sectarian enclaves.

Despite some evidence that the troop buildup has improved security in certain areas, sectarian violence continues and American-led operations have brought new fighting, driving fearful Iraqis from their homes at much higher rates than before the tens of thousands of additional troops arrived, the studies show.

The UN International Organization for Migration detects a huge acceleration in the rate of displacement. The Iraqi Red Crescent Organization believes the number of displaced has more than doubled to over 1 million so far in 2007.

Population displacement resulting from sectarian violence continues, imposing burdens
on provincial governments and some neighboring states and increasing the danger of
destabilizing influences spreading across Iraq’s borders over the next six to 12 months.
The polarization of communities is most evident in Baghdad, where the Shia are a clear
majority in more than half of all neighborhoods and Sunni areas have become surrounded by
predominately Shia districts. Where population displacements have led to significant
sectarian separation, conflict levels have diminished to some extent because warring
communities find it more difficult to penetrate communal enclaves.

No surprise here. Get the 3 big ethnicities away from each other and they'll find it harder to shoot and blow up and generally terrorize each other.

How long will it take the Shiites to drive the rest of the Sunnis out of Baghdad? The Sunni areas have got to be especially crunched on housing since the Sunnis are gradually losing access to all the housing in Baghdad.

The Bush White House and its supporters somehow find ways to look at the unfolding tragedy and see signs of progress toward some goal that will help improve American security. This would be laughable if it wasn't so sad. The Sunnis of Anbar province are not Al Qaeda. The Shias factions fighting each other over who controls the oil and who controls various industries are also not Al Qaeda. Tribal and Muslim sectarian fighting in Iraq is not war over vital US interests.

While I'm at it: the Middle East is running out of oil. Therefore the Middle East is becoming less valuable to us, not more. All the armchair generals rooting for continued US fighting in the Iraq civil war ought to shift their focus to topics that matter for US national security such as how to develop replacements for oil and how we ought to change immigration policy to keep Muslims out of the West.

The owner of a fast food joint in Montana's booming oil patch found himself outsourcing the drive-thru window to a Texas telemarketing firm, not because it's cheaper but because he can't find workers.

I do not believe the owner's claim. Of course the telemarketing service is cheaper. He could find the workers if he was willing to pay more than $10 per hour. He does not want to pay the market rate for labor. Um, I remember when rising market rates for labor used to be considered a good thing, not a problem. I still think rising hourly rates and wages are a good thing.

Record low unemployment across parts of the West has created tough working conditions for business owners, who in places are being forced to boost wages or be creative to fill their jobs.

John Francis, who owns the McDonald's in Sidney, Mont., said he tried advertising in the local newspaper and even offered up to $10 an hour to compete with higher-paying oil field jobs. Yet the only calls were from other business owners upset they would have to raise wages, too. Of course, Francis' current employees also wanted a pay hike.

See, he uses the telemarketing service in order to save money. He reduced his total demand for labor to avoid higher unit labor costs.

His method of saving money is a great idea which reduces the total amount of labor needed. A worker manning a drive-thru window isn't going to be busy much of the time. Picture hundreds or thousands of restaurants with drive-thru windows all using telemarketing firms to take orders. The total number of order takers could be much lower since each phone worker could be busy for a much larger fraction of the time. No time wasted waiting for a car to pull past after giving an order. No time wasted when there are no cars waiting.

This idea is great for seasonal businesses too. Different areas have seasonal rushes at different times of the year. A telemarketing order taker could work Florida restaurants in the winter and Lake Georgia New York restaurants during the summer.

Telemarketing with human order takers still uses human labor though. The next obvious step is self-serve order entry in kiosks or via PDAs and cellphones. No need to waste human labor to get order info and to accept credit card or debit card payments.

Beyond automated order taking the next step is automated food preparation. Large scale deportation of illegal aliens combined with a halt to all low skilled immigration would create economic conditions (i.e. higher priced low skilled labor) conducive to automation of food preparation. Look at hamburger cooking for example. That seems like an automatable task. Take a burger out of a refrigerated stack and via a conveyor belt place it in a cooking unit. The cooking unit could time the cooking and control the temperature for a more consistent result. What is needed to make it happen? Higher labor prices. Higher labor prices drive innovation.

Thus the big cities such as Johannesburg have become seedbeds for robbery and violent hijacking, making crime South Africa's biggest problem. Sometimes it is the work of individuals; sometimes the work of organized gangs. One black editor, while in no way supporting the old apartheid regime, remarks wryly: "There was no city crime or unemployment in the old days. If you were a black without a [residence] pass and a letter from your boss saying you had a job, the police would run you out of town. Today, whether you are black or white, you take your life in your hands if you walk downtown at night."

Organizations that can afford extreme security measures use them.

In Johannesburg, homes and offices lie protected behind high walls topped with electrified wire. Security cameras and steel gates are common. The building housing British Airways is guarded by dogs and security officers with automatic weapons, dressed like members of a SWAT team. At the US consulate-general, where the threat may be from terrorism, as well as local crime, even Embassy-owned cars must negotiate hydraulically operated pylons, then a caged area where security officers check with mirrors under the car and open hoods and trunks, before permitting access.

Hijackings are so frequent that some car owners have the registration numbers of their vehicles painted on the roofs of their cars so police helicopters can better trace them. Says one diplomat: "A kid who might have to work 20 years to buy a car, says, 'The heck with that, I'll just go out and hijack one.' "

South African authorities were hoping to achieve a drop in crime in the 12 months ending in March this year of between seven and 10 per cent. Instead, recent figures show that murders increased by 2.4 per cent (to 19,202), bank robberies by 118 per cent, residential robberies by 24 per cent, car hijackings by six per cent, drug-related crimes by 8.2 per cent and commercial crimes by 12.6 per cent. The number of rapes (52,617) and attempted murders (20,142) decreased.

The official statistics are probably cooked to make the crime rates look lower than they really are. This article mentions that claim below. I've also heard the same claim from a South African white who tells me that statistics releases that used to happen very quickly are now delayed for months and years. He says the statistics in question are easy to prepare and he knows how it is done.

There were no figures for the number of foreigners targeted. Opposition parties claim that the true figures may, in fact, be much higher.

"Given that 32 per cent of all crimes are not reported to the police, we know that the crime rates are unacceptable," a spokesman for the Democratic Alliance party said. He added that, with a murder rate of 40.5 per 100,000 people, the number of killings in South Africa was eight times the world average.

The murder rate in Cape Town has dropped substantially from a high four years ago and has stabilised in recent years - but the city is still the murder capital of South Africa, says a study by the City of Cape Town.

The study has revealed that at the end of 2006 the murder rate was 57.3 per 100 000 of the population, down from 84.4 per 100 000 people in the 2002/03 period.

Mr Cachalia said this resulted in a total of 672 168 vehicles being searched. This represents an additional 106 921 vehicles or an increase of 18.9 percent when compared to the same period in 2006, he said.

About 1.4 million people were searched, which is an increase of over 280 000 people who were searched during the same period last year.

Raw sewage flowing into Lake Chrissie is threatening to turn South Africa's largest natural freshwater body into a massive cesspool.

Environmentalists claim that for seven years, local authorities ignored their pleas to upgrade water treatment facilities; officials only took action, they say, when local revenue was affected by the closure of tourism routes such as biking trails, as a result of pollution.

Patients are turned away either because nurses and doctors are on strike or the nurse on duty couldn't make it to work because there was no transport from her home.

This might sound "mischievous" but a crippling fuel shortage means that there is no transport to work. In this southern Africa nation, it is understandable if workers either come to work three hours late or never turn up.

As a spin off of the economic crisis, patients are being diagnosed with various ailments and told to buy themselves medication from expensive, privately owned pharmacies beyond the reach of most Zimbabweans.

"We used Statistics SA's mid-year population estimates, which they get from the national census and comparing the figures we estimate that around an average 800 000 white South Africans have emigrated from 1995 until 2005. We put the number at no less than 500 000 and no more than 1,2-million."

The institute first published this figure in 2006. Although media reports at the time suggested white South Africans could have been under-counted in the 2001 census, Cronje said a major shrinkage in the white population led to that conclusion.

"The major gap was shown mostly in white men aged between 25 and 35 years old. This kind of pattern is usually shown in countries where there was a war and young men were killed. We don't have anything like that, so the assumption is that emigration was the cause."

``Kiwis argue with me about my Afrikaans rural culture and heritage, and I tell them we are very proud of our music, our food, our conservatism, our history. ``I say to the white Kiwis: what is your culture? And they have no answers.'' He says South Africa and Zimbabwe are pretty much finished as productive economies and are only surviving on foreign aid. ``The 2010 soccer world cup will open the eyes of the world to the mess there. The foreign visitors will be robbed and ripped off in every way imaginable. Then they will realise that white South Africa was not so bad. ``When they accept (like Angola, Mozambique, Zambia) that they can't recover without the white man's help, they will start importing white advisers. But first they have to hit the bottom and that will take 30-40 years.'

The demographic outlook for South Africa is worse than the reported net out migration of whites suggests. Those whites who are leaving are both younger and more technically competent than those who stay behind. When the older white white managers, engineers, and technicians retire the next generation won't be there to take over. Even worse, racial preferences laws will make it hard for the younger generation whites to take over anyway. So the competence shortage will intensify and components of the economy that now work will cease to do so.

I am curious to know the trend of average age of workers in various professions in South Africa. My guess is average age is rising, especially among the more competent. In which occupations will the loss of competency cause the biggest disruptions to the economy? I'm thinking the legal system and police need competence the most. Without security and the ability to enforce contracts all other sectors of the economy will suffer.

Maurice Acker, a junior at Marquette University in Milwaukee, practices Spanish with natives from Spain every Friday morning at the school's language lab. They talk about sports, cultural differences – the usual stuff of student conversations – but there's a twist: Mr. Acker has never met any of his conversational partners in person.

That's because Marquette's Spanish and Italian curriculums use Skype, a free Internet phone service, to connect students with "language partners" all over the world.

Typically, students practice Spanish for 25 minutes and then switch to English for 25 minutes (it's an exchange: Their partners want to practice speaking English). All the students need is an Internet connection, a webcam, a microphone, and headphones.

"I feel more comfortable speaking in class than I did before," says Acker, who adds that his conversations over Skype have helped his Spanish improve much faster than drills in class.

Students don't need to all come to the same room to do this. They can do it from any location that has a broadband connection.

Imagine something like this approach applied to other subjects. Why not form virtual communities online that debate and discuss an assortment of course topics. Want to learn Greek philosophers? Roman history? Macroeconomics? Study discussion groups could form virtually to allow people to chat with each other about topics they are learning. Then they could take online tests to see if they've learned enough to earn college credits.

Lectures will still have a place. But most lectures can be recorded. You could take a practice test and then in the areas you are weak you could listen to lectures, register indicating an interest in discussions on those topics, and do exercises in interactive learning software.

A record number of British citizens are leaving the country, according to official figures published yesterday.

An unprecedented 196,000 left the country last year, with Australia, Spain, America, New Zealand and France the most popular destinations for those seeking a new life.

The exodus is countered by high levels of immigration, with the Office for National Statistics saying that 574,000 people came to live in Britain between June 2005 and 2006.

A small island with 60 million people does not need more people. Besides, if the elites won't crack down on crime then the criminals among the immigrants are an even bigger burden than they'd be in countries with tougher policies on crime.

The new figures also suggested that middle-class Britons are beginning to move out of towns in southern England that are home to large numbers of immigrants.

This phenomenon - called 'churn' by Whitehall officials and 'middleclass flight' by other commentators - saw 240,000 people move out of London last year.

"Churn". I love it. Churned stuff tends to go around and around. So politically correct ideologues side step the lack of a return path for these English folks when they leave the cities. Or maybe they think they are whipping white cream to make colored butter?

A comment by "Celine" explains why she is going to leave Britain:

My husband and I will be leaving the country in the next few years, leaving it to the scroungers. Why? Because we are taxed, taxed, taxed and receive nothing in return. The public transport system is falling apart, while, at the same time, the government is conducting a war on cars. Council taxes keep going up but, at the same time, the council keeps cutting services. Most of all, crime keeps increasing. We live in a quiet village, but this year already, three of the shops have been robbed, two of the times by men wearing balaclavas. The railway station is regularly vandalised. The playground equipment is vandalised. Nothing is safe and the government does nothing but arrest law-abiding citizens for crimes against political correctness and for defending themselves against thugs. We've had enough.

The voters need to get mad as hell and vote out the leftists. Why don't they?

But the findings also demonstrate the impact immigration is having. A quarter of British babies are now born to a foreign parent and in some local areas in London, Oxford and Essex the population has grown by up to 14% in five years, largely as a result of immigration.

"We have figures for the contribution of mothers and fathers born abroad and that has risen slightly from under 20% in 2001 to slightly over 25% now," an ONS spokesman said. "That reflects the cumulative effect of immigration over the last 40 years."

The BND was pursuing one goal in particular: It wanted to know whether or not the Taliban were prepared to withdraw from al-Qaida's embrace. Creating a rift between the two groups is considered by the West as a precondition for the lasting success of Operation Enduring Freedom in Afghanistan. In return, the German government would intensify its involvement in reconstruction by building hospitals, roads and mosques -- the sorts of projects that the German public tends to support.

The German public tends to support mosque construction? Oh dear.

The Taliban wanted to be more like Yasser Arafat. Why would they want to be that ugly? (you can tell I am taking real serious the idea of negotiating with the Taliban)

The Taliban demanded political recognition of the kind once given to Yasser Arafat's PLO. "We do not want to be considered terrorists. We want to be treated as a political force," the "commander" is said to have demanded, whereupon the agent leading the BND's three-man delegation is said to have responded: "Then break with al-Qaida." The BND agent outlined a multi-stage process in which Berlin would begin by offering civilian aid, to be followed by regular talks -- at which point recognition of the Taliban as a political party could be discussed.

This started in July 2005. The Germans were never clear whether the guys they were negotiating with had authority to speak for a large faction of the Taliban. They flew these Taliban into Zurich Switzerland for initial negotiations.

The US has also looked for ways to split portions of the Taliban away from the Al Qaeda and away from the most Islamically fervent elements of the Taliban.

Even the US, which officially refuses all contact with the Taliban, have repeatedly used mediators to discreetly gauge the willingness of the insurgents to talk. The BND coordinated its secret talks with the US intelligence agencies, and European countries such as France were also in the know. "There was a time when many Western countries spoke to the Taliban," says one German government official.

So "we never negotiate with terrorists" is not always the case. "We never negotiate with terrorists unless we think they might be willing to renounce terrorism and Jihad" might be closer to the truth.

The talks ultimately failed.

The German talks eventually collapsed, apparently due to the insurgents' refusal to distance themselves from al-Qaida. The BND took that refusal to mean that the Taliban is not all that interested in civilian reconstruction. But the negotiations only came to an end after eight to 10 weeks of secret diplomacy.

The Taliban is not all that interested in civilian reconstruction? My guess is they are interested in more wives, keeping down the women (which means keeping out Western influences), more money, and putting the screws to other tribal factions.

VIEWED from Iraq at the tail end of a 15-month deployment, the political debate in Washington is indeed surreal. Counterinsurgency is, by definition, a competition between insurgents and counterinsurgents for the control and support of a population. To believe that Americans, with an occupying force that long ago outlived its reluctant welcome, can win over a recalcitrant local population and win this counterinsurgency is far-fetched. As responsible infantrymen and noncommissioned officers with the 82nd Airborne Division soon heading back home, we are skeptical of recent press coverage portraying the conflict as increasingly manageable and feel it has neglected the mounting civil, political and social unrest we see every day. (Obviously, these are our personal views and should not be seen as official within our chain of command.)

This is a highly insightful article by people who demonstrate an amazing nuance in their understanding of what they've witnessed first hand while in danger for an extended period of time.

The Iraqi Army and police are not our allies.

A few nights ago, for example, we witnessed the death of one American soldier and the critical wounding of two others when a lethal armor-piercing explosive was detonated between an Iraqi Army checkpoint and a police one. Local Iraqis readily testified to American investigators that Iraqi police and Army officers escorted the triggermen and helped plant the bomb. These civilians highlighted their own predicament: had they informed the Americans of the bomb before the incident, the Iraqi Army, the police or the local Shiite militia would have killed their families.

As many grunts will tell you, this is a near-routine event. Reports that a majority of Iraqi Army commanders are now reliable partners can be considered only misleading rhetoric. The truth is that battalion commanders, even if well meaning, have little to no influence over the thousands of obstinate men under them, in an incoherent chain of command, who are really loyal only to their militias.

The recent chorus in Washington DC about how well things are going in Iraq is working is "misleading rhetoric". Gotta agree on that score. No, the surge is not working. No, Iraq isn't going to turn the corner under our occupation.

The Shia goal of consolidation of their power puts them in conflict with the American goal of reconciliation with no group coming out as losers.

The Iraqi government is run by the main coalition partners of the Shiite-dominated United Iraqi Alliance, with Kurds as minority members. The Shiite clerical establishment formed the alliance to make sure its people did not succumb to the same mistake as in 1920: rebelling against the occupying Western force (then the British) and losing what they believed was their inherent right to rule Iraq as the majority. The qualified and reluctant welcome we received from the Shiites since the invasion has to be seen in that historical context. They saw in us something useful for the moment.

Now that moment is passing, as the Shiites have achieved what they believe is rightfully theirs. Their next task is to figure out how best to consolidate the gains, because reconciliation without consolidation risks losing it all. Washington’s insistence that the Iraqis correct the three gravest mistakes we made — de-Baathification, the dismantling of the Iraqi Army and the creation of a loose federalist system of government — places us at cross purposes with the government we have committed to support.

There's no way to reconcile this conflict of interests. What can we do? Stop trying to protect Sunnis from Shia depredations? We aren't going to exercise the level of brutality needed to put down insurgencies of this sort. In my view US interests are not at stake in Iraq. Al Qaeda isn't going to take over. The neighbors won't all invade if we withdraw. Iraq's oil reserves are depleted just like Saudi Arabia's. For energy security we need to look at developing non-oil energy sources. We really can leave. If we need to improve our security then the money we'll save by leaving can be spent on measures that will make us safer. Keeping over one hundred thousand troops in Iraq battling all the factions there does not make us safer.

They say there have to be losers in Iraq. But who gets shafted? My answer: The Sunnis have to get shafted. Maybe the Kurds get shafted too. Probably some Shia factions get shafted by other Shia factions. The Christians and Turkomen and other groups are big losers. Either that or every group gets its own country from a big partitioning. But too many factions in Iraq oppose partition and some of those factions will get shafted instead.

Here is the most important thing Americans need to understand: We are finally getting somewhere in Iraq, at least in military terms. As two analysts who have harshly criticized the Bush administration’s miserable handling of Iraq, we were surprised by the gains we saw and the potential to produce not necessarily “victory” but a sustainable stability that both we and the Iraqis could live with.

The attached trip report does, however, show there is still a tenuous case for strategic patience in Iraq, and for timing reductions in US forces and aid to Iraqi progress rather than arbitrary dates and uncertain benchmarks. It recognizes that strategic patience is a high risk strategy, but it also describes positive trends in the fighting, and hints of future political progress.

These trends are uncertain, and must be considered in the context of a long list of serious political, military, and economic risks that are described in detail. The report also discusses major delays and problems in the original surge strategy. The new US approach to counterinsurgency warfare is making a difference, but it still seems likely from a visit to the scene that the original strategy President Bush announced in January would have failed if it had not been for the Sunni tribal awakening.

He's doubtful that we'll be successful there. Yet we thinks the cost of giving up is too high. I think if he didn't see such high costs for giving up he'd be even more pessimistic in his appraisal of conditions in Iraq.

I should stress I did not see any dramatic change in our position in Iraq during this
trip. Many of the points, the problems that exist there, are problems which have existed
really since late 2004, if not earlier. I didn’t see a dramatic shift in the ability of Iraqis to
reach the kind of compromise that is almost the foundation of moving forward, although
there were some elements of progress. And I use the word “tenuous” in talking about my
trip and strategic patience simply because the risks are so high and they are higher than
even – or lower than even, I should say. We really have problems even in defining
success.

...

One of the most critical problems is the prime minister’s office. And since I did
not speak to the prime minister, I want to be careful about using the term “office.” But
throughout the visit, time and again people said that the prime minister’s office had been
involved in the support of Shi’ite ethnic cleansing, that in had intervened in detainment or
military operations against Shi’ite militias, that it had refused to act in moving forward in
areas where the prime minister had direct authority in bringing Sunnis and Sunni tribal
elements into the government and into the security structure.

...

It is clear that in some ways our intervention in Iraq has allowed the Sadr militia
and shi’ite extremist groups to operate in terms of sectarian cleansing with more freedom
than they had in the past. This is an ongoing problem, and it is a very serious one. It is
also clear that we face a growing threat from the more hostile elements of those Shi’ite
militias, and that they have had stronger Iranian backing and new forms of Iranian arms.

Cordesman does not see partition as a solution.

It is also clear that while there are still some American politicians talking about
partition as if this was soft and manageable. It is brutal, it is repressive, it kills people, it
injures them, it drives them out of their homes, and it drives them out of the country. To
talk about this as if it was something that is gentle or non-violent is simply dishonest, it
has not happened, and it cannot happen in the future.

Clue train to Anthony Cordesman: But the partition is happening anyway. I repeat: The partition is happening anyway. You even say so. We can't stop it. We might as well help the Shias and Sunnis move away from each other under our protection so that they don't get killed or injured. We might as well help Sunnis and Shias basically swap homes and to help them build homes where they flee to.

The battles in the south are between Shia factions.

The south is effectively under the control of struggling Shi’ite factions. It is quite
clear that the British have been defeated, that they are essentially marginalized in an
enclave. We are watching struggles between Shi’ite factions, many of which are a little
more than criminal gangs. We are not even able to have our PRTs operate in some of the
problems involved, and we simply will never have the military forces to intervene both in
Baghdad, the northern and central areas like Diyala and the south. Whatever happens,
there has been a kind of partition already.

The struggle for Baghdad is still going on street by street, area by area. There is
still sectarian cleansing in the south, there are still battles in Diyala, in Ninawa, in the
north-central areas.

He admits that we do not have enough soldiers to fight in the south. The battles between Shia factions and the ethnic cleansing in many areas are beyond our ability to stop.

I am amazed that we are over 4 years into the Iraq debacle and yet George W. Bush and other war supporters can still orchestrate rah rah episodes in the press about how things in Iraq are starting to turn around in our favor. Some of our top military officers tell lies about how long it would take to pull out of Iraq. Lunatics write op/eds arguing that we are making progress in Iraq. Our leadership and public intellectuals are pretty lame.

Vladimir Putin announced ambitious plans to revive Russia's military power and restore its role as the world's leading producer of military aircraft yesterday.

Speaking at the opening of the largest airshow in Russia's post-Soviet history, the president said he was determined to make aircraft manufacture a national priority after decades of lagging behind the west.

The remarks follow his decision last week to resume long-range missions by strategic bomber aircraft capable of hitting the US with nuclear weapons. Patrols over the Atlantic, Pacific and Arctic began last week for the first time since 1992.

Russia's oil fields are going to peak in production soon. The Russians can ill afford to squander their oil wealth.

The Kremlin should focus instead on development of the private sector. Kremlin plans for a revival of the Russian aerospace industry make more sense because the goal is to generate more revenue from sales of higher tech products.

Last week Russian officials said they planned to build 4,500 civilian aircraft by 2025, while the Kremlin has pledged £125bn to boost the civilian industry.

As part of the plan to boost significantly Russia's civilian aircraft industry, a new state-controlled organisation, the United Aircraft Corporation, has been created.

But can a corporation owned by the Russian government operate with sufficient efficiency to compete with Boeing and Airbus?

Most industry observers agree that Russia's civilian aviation industry is lagging behind the fighter aircraft makers. "Our military aviation is all right. The commercial aviation is slowly recovering," says Ruslan Pukhov, director of the Moscow-based Center of Analysis of Strategies & Technologies, a defense think tank. To boost the Russian industry's ability to compete in passenger and transport jets against Boeing (BA) and Airbus, the Kremlin created United Aircraft, a state holding company combining key producers such as MiG, Sukhoi, Ilyushin, Tupolev, and Irkut. United Aircraft's ambitious goal: to produce and sell about 4,500 aircraft worth some $250 billion by 2025. For starters, Russian airlines are expected to order some $600 million in Russian-built aircraft at the Moscow air show.

When the Russians start sending their bombers out to skirt US and British airspace which audience are they playing to? European government leaders? American government leaders? The Russian public? Or maybe potential sovereign buyers of Russian military aircraft?

The EU study showed that, compared with the Swedes' entitlement of 33 days of paid vacation in 2006, Germans had 30, Italians had 28 and Estonians, who ranked last, had 20.

(These numbers include the statutory minimum paid leave, as well as days added by collective bargaining agreements, but not public holidays. Not all EU countries are included in the study, since the way of gathering data relating to vacations is different in a way that makes comparisons difficult.)

Even more strikingly, Americans had, on average, only nine days of paid vacation in 2006, according to a recent report from the Center for Economic and Policy Research in Washington. That discrepancy is, in large measure, because the United States has no statutory minimum of paid vacation days.

In the face of this kind of global competition, some are now saying that Swedes must seriously consider giving up some of their cherished summer days off.

The article describes the pressures on Swedish business to keep factories and other facilities running more days of the year. Also, since we use more services even when vacationing the demand for holiday workers has probably risen as a proportion of the total economy.

In a way it makes sense for some governments to legislate more days off. People feel a need to work long hours to compete with others in status hierarchies. Mandatory vacation amounts to a mutually agreed upon ceasefire period where shifts up and down status hierarchies can't happen. People can escape the need to compete because they can know that their competitors are also not spending vacation times competing.

WASHINGTON: For years, the Bush administration has shrugged off concerns about the trillions of dollars that the United States owes to China, Japan and oil-producing countries in the Middle East, arguing that these debts give no undue leverage to foreign governments.

But at a time of global financial instability, the administration has started to worry.

U.S. concerns - like those of many European policy makers - focus on a growing but little understood trend of foreign governments converting their debt holdings into "sovereign investment funds" that are acquiring assets in the United States and elsewhere - and could influence the markets when they buy and sell.

Businesses owned by foreign governments can hire lobbyists to represent the businesses. Then governments can use their business holdings to buy influence in other governments.

Funds in the hands of sovereign governments are becoming huge.

Another concern is the sheer size and potential growth of these funds. Their estimated $2.5 trillion in assets exceeds the sum invested by the world's hedge funds. Also, Morgan Stanley, in a widely cited study, projects that these investment funds could grow to a staggering $17.5 trillion in 10 years.

The Chinese government has agreed to pay $3bn (£1.5bn) for a 10% stake in US private equity company Blackstone.

It will give Blackstone a head start in Chinese takeover deals and allow China's government to tap into the global private equity boom.

China tried to buy oil company Unocal in 2005 but domestic opposition in the United States stopped the deal.

The role of China's government in their economy will limit how economically efficient China can become. But even if the Chinese government's interference eventually limits per capita GDP in China to half the US per capita GDP that still will translate into a total GDP more than twice the US. China's huge population mean that China doesn't have to become as efficient as the US in order to become economically much larger.

When US billionaires buy up US politicians there's a greater overlap in interests between the influence buyers and US regular folks than when Chinese billionaires, the Chinese government, and other foreign interests begin to do the same. The elites in the future won't even be your elites.

The real problem for the GOP is less Hispanic voters than Hispanic leaders—92
percent of all elected Hispanic politicians are Democrats.

The reason for the 92% Democrats is obvious if you stop and think about
it (which apparently nobody does): since most Hispanic citizens vote
Democratic, most Hispanic-majority districts in the country are
Democratic. And those are the ones in which Hispanics are most probable
to get elected. So, it makes all the sense in the world for politically
ambitious young Hispanics to join the party that's more likely to
get them elected to office: the Democrats.

So, what Bush and Rove have been doing by not enforcing the immigration
laws is helping create a new Democratic Latino elite that will plague
the GOP for decades.

As politics, Rove's immigration ploy was negligent at the levels of
simple logic and numeracy.

Sen. Mitch McConnell's close backing of President Bush on immigration and the Iraq war is costing him support among Kentucky Republicans, and, according to some party members, hurting his chances for re-election next year.

He even could face a primary challenge from former Republican gubernatorial candidate Larry Forgy, who contends that Mr. McConnell's in-state problems are compounded by job losses to producers beyond America's borders.

In today's landscape of ideology-driven, scorched-earth political partisanship, Dwight D. Eisenhower looks like some extinct dinosaur from eons ago. Americans, to echo the famous campaign slogan, genuinely liked Ike. Europeans liked Ike. Michael Korda likes Ike, too, and after reading Ike: An American Hero, his mammoth biography, it's easy to see why: "Ike was an American from Abilene, but he was also a good European, perhaps even a great one; and his view of life was rooted in common sense, decency, and tolerance, not in ideology."

Whether as president during the 1950s or as Supreme Commander of Allied forces during World War II, Eisenhower developed productive working relationships with some of the most difficult personalities imaginable, including US Gen. George Patton, France's Charles DeGaulle, Winston Churchill, and British Field Marshall Bernard Montgomery. Korda sums up Eisenhower's unique genius for working well with others: "Even his critics praised his fairness, his energy, his patience, his common sense ... and above all his matchless ability to deal with even the most difficult of prima donnas."

Imagine that George W. Bush and our current top generals all reported to Ike and that they came to see Ike to tell him that the US military would need years to withdraw from Iraq. Suppose they tried to tell Ike (as they lie to the American people) that the withdrawal would take years just because the logistics of trucking out so many men and so much material. Ike would fire the idiots. But today we get these idiots in the White House and serving as highest level officers in the Pentagon. We once were much better ruled.

Why this decline in level of competency at the top? World War II put Ike in a situation where his competence became widely known. I think one of the reasons we have less competent politicians today is that conditions afford fewer opportunities for demonstrating real competencies in areas touching on politics. People who demonstrate very high competency in business mostly would prefer to make money than run for public office. We seem to lack theaters for competency demonstration for those not aiming at wealth as their main ambition.

By the time he arrived in Prague in June for a democracy conference, President Bush was frustrated. He had committed his presidency to working toward the goal of "ending tyranny in our world," yet the march of freedom seemed stalled. Just as aggravating was the sense that his own government was not committed to his vision.

As he sat down with opposition leaders from authoritarian societies around the world, he gave voice to his exasperation. "You're not the only dissident," Bush told Saad Eddin Ibrahim, a leader in the resistance to Egyptian President Hosni Mubarak. "I too am a dissident in Washington. Bureaucracy in the United States does not help change. It seems that Mubarak succeeded in brainwashing them."

If Mubarak's propaganda is effective then Bush ought to stop and consider what this says about the limits to what we can expect democracy to accomplish. A democracy isn't much better than its voters. Well, real voters are pretty ignorant and most voters aren't high in IQ.

Although there is little to no record of this operation in Ike's official papers, one piece of historic evidence indicates how he felt. In 1951, Ike wrote a letter to Sen. William Fulbright (D) of Arkansas. The senator had just proposed that a special commission be created by Congress to examine unethical conduct by government officials who accepted gifts and favors in exchange for special treatment of private individuals.

General Eisenhower, who was gearing up for his run for the presidency, said "Amen" to Senator Fulbright's proposal. He then quoted a report in The New York Times, highlighting one paragraph that said: "The rise in illegal border-crossing by Mexican 'wetbacks' to a current rate of more than 1,000,000 cases a year has been accompanied by a curious relaxation in ethical standards extending all the way from the farmer-exploiters of this contraband labor to the highest levels of the Federal Government."

NAZARETH, Israel—For 15-year-old Issa, days of summer start when the sun rises over a northern Israeli hill, shining on a garbage dump, a thorny field and then the dirty mattress that is his bed.

Issa is among hundreds of Palestinian child laborers who sneak into Israel from the West Bank, hawking or begging at traffic junctions.

Israel's massive barrier of walls and fences separating it from the West Bank has made it harder for adult laborers to enter Israel, so families wracked by poverty are increasingly sending their children instead.

"Pimps" pay parents to use their children as beggars.

Often Palestinian or Israeli Arab middlemen pay the children's families $250 for the right to take a child into Israel, the advocates said.

These "pimps," as they are called by Israeli authorities, force the children to beg at intersections, take their money at the end of the day and bring them to sleep in rundown apartments, they said. The children return home on weekends, or every few weeks.

"This brings continuous deprivation on the children who do not see their families, do not go to school and never rest," said Salwa Kupti, an Israeli Arab social worker in Nazareth who has worked with the children for 10 years. "The children become machines."

Reality is not pretty.

Palestinian children can enter Israel as long as they are escorted by a Palestinian with a work permit to enter. Also, some sneak in at locations along the barrier where the barrier is not complete yet. So then will the begging decrease as the barrier becomes more developed?

I wonder what the trend is with illegal alien workers in Israel. Are the numbers of Palestinian illegals going up or down?

A state's live-in desirability, as defined by CQ Press in the form of a livability index that considers 44 social, cultural, and economic factors, rigorously correlates with that state's estimated average IQ. The correlation using my numbers is .78, while using VCU Professor McDaniel's subsequent better numbers yields an r-value of .80. In both cases, the p-value is effectively zero.

That .80 constitutes a stronger relationship with livability than with any other variable considered. Keep in mind, the importance of IQ underestimated by this method, as many of those variables are part of the 44 used to gauge livability--in this sense, they have a built in statistical advantage that the IQ estimates do not have. Other correlations with livability include:

Illegitimacy rate (-.68)Average life expectancy (.62)Racial composition of the population (.62)% of the population with a bachelor's degree or greater (.56)Violent crime rate (-.54)Unemployment rate (.50)Per-student educational expenditures (.45)Gun ownership rate (-.44)Median age (.20)

Being surrounded by dummies lowers one's quality of life. The more dummies that have dumb babies the poorer your quality of life will become. Not a pretty thing to say. But the truth can be ugly. Audacious says raising IQ should become a primary policy goal. I agree.

An incredible amount of time and effort is spent arguing between competing policy prescriptions which either have little to offer toward improving quality of life or which have a net effect of lowering quality of life. I tire of hearing liberals and pseudo-conservatives posing as morally superior or more realistic than each other while both groups ignore empirical reality.

The correlation of IQ and per capita GDP is so strong that it is exponential. This strongly suggests that lower IQ immigrants lower the productivity of higher IQ workers. Some libertarian economists want us to believe that immigrants of lesser intellectual ability free up smarter people for smarter work and enable greater specialization of labor. But the results reported in Lynn and Vanhanen's IQ and the Wealth Of Nations show this is not the case. Dummies create too many external costs for smarties that they more than cancel out any benefits that come from the theoretical potential of greater specialization of labor. There appears to be a threshold IQ below which people can contribute very little to raising per capita GDP.

If realistic discussion of IQ research was not treated by the Left as a violation of a taboo we could start building a consensus on how to raise IQ. Would nutritional improvements, drugs, genetic engineering, or eugenic breeding practices work best for boosting IQ? The answer depends on when and where you ask that question. In Africa better nutrition and better disease control would both boost IQ. In Western economies my guess is that our best bet for boosting IQ is to encourage more eugenic breeding practices.

Advances in genetic testing technologies will bring the costs of genetic testing down so far that the genetic variants that contribute to determining IQ will be discovered over the next 10 years or so. Then the taboo against IQ discussions will break down as the scientific evidence makes the existing taboo impossible to defend. When that new era arrives methods to boost IQ will finally get the attention they deserve.

Opinion polls suggest that almost two-thirds approve of Salmond’s administration so far, and also that independence one day is inevitable although under a quarter of the respondents actually were in favour of it. I have just spent some time in Scotland, and pretty well everyone I spoke to there confirmed the broad outlines of these polls. However unenthusiastic they might be at the prospect, almost everyone considered that independence was the virtually certain outcome of devolution. And that would be Blair’s irreversible legacy.

One Scottish grandee, a Unionist, had an interesting angle. The Scots, he said to me, have a very strong sense of their own identity, and do not take kindly to others coming to live among them, or telling them what to do. This is tribalism, with its plusses and minuses, and it means that when they look at Britain they see that immigration is out of control, and there is a diminishing sense of identity, and even less national pride. The Scots hope to avoid such a fate. In a nutshell, then, repudiation of multi-culturalism is the motor driving Scottish independence and the ultimate break-up of Britain.

They wouldn't need to worry about medical doctors trying to blow up one of their airports if they had a controlled border with England and did not allow Muslims in to work. As things now stand multiculturalism is becoming a growing imposition on Scots living in Scotland. For another example of how Muslim immigration is an imposition on Scots see my post Eating At Desk During Ramadan Banned At Scottish Hospitals.

The economy of Zimbabwe is facing total collapse within four months, leaving the country facing a slide into Congo-style anarchy, The Sunday Telegraph has been told.

Western officials fear the business, farming and financial sectors may be crippled by Christmas, triggering a collapse of government control that could leave the country prey to warlords and ignite long-suppressed tribal tensions.

This is like Atlas Shrugged.

Speaking anonymously because of the sensitivity of the subject, one Western official said: "It is hard to be definitive, but probably within months, by the end of the year, we will see the formal economy cease to work."

He added: "One of the great dangers in all this, if Mugabe hangs on for much longer, is that the country will slip from authoritarianism to anarchy, the government will lose control of the provinces, it will lose control of the towns and you will have a situation where the central authority's writ no longer holds."

So where is Galt's Gulch? Instead of Dagny Taggart and John Galt putting Zimbabwe back together Chinese entrepreneurs will probably become the new colonialists. Africa is no longer the White Man's Burden (except for rent-seeking leftists in NGOs) because white men with talent can make more money in the First World. Whereas China still has plenty smart but very poor people who could provide the brains needed to make African economies function.

EVERY foreigner in America, including British visitors, would be required to carry an ID card bearing photograph and fingerprints under plans drawn up by Rudolph Giuliani, the frontrunner for the Republican presidential nomination.

Giuliani is hoping to cement his status as the Republican favourite by promising to enforce immigration and border controls, drawing on expertise in combating crime from his time as mayor of New York. He announced last week that all foreigners, including holiday-makers, would be obliged to carry a “tamper-proof” biometric card, which could be issued at ports of entry.

“If you don’t have that card, you get thrown out of the country,” Giuliani said. He intends to call it a Safe card (for secure authorised foreign entry).

Um, how is this going to help? Think about it. Suppose you are a terrorist. You want to move around inside the US. You manage to get a driver's license. Maybe it has your real name on it. Maybe it has a fake name. A cop pulls you over for speeding. He asks for your "Safe" card. You reply "But I have US citizenship! I have no need for a Safe card". Well, how can the cop know? Only if initial issuance of a driver's license includes an entry in a database that marks the person as a visitor would the cop know for sure that a claim of citizenship was false.

If we can know someone is a foreigner then what? Millions of foreigners are living and moving around inside the United States. Few will come into contact with law enforcement personnel and few of those contacts will provide law enforcement personnel any reason to suspect a person is a Muslim terrorist.

Fifty-eight percent (58%) of voters nationwide favor cutting off federal funds for “sanctuary cities” that offer protection to illegal immigrants. A Rasmussen Reports national telephone survey found that just 29% are opposed. Republican Presidential hopeful Mitt Romney proposed such a plan earlier this week.

By a 71% to 16% margin, voters also favor a proposal that would require all foreign visitors to carry a universal identification card as proposed by another GOP Presidential hopeful, Rudy Giuliani. Seventy-four percent (74%) also favor the creation and funding of a central database to track all foreign visitors in the United States.

Lots of illegal alien Mexicans are driving around without a drivers license or car insurance. A "Safe" card would then become just another document they don't have that doesn't keep them from living here for months and years. We need real border control. We need aggressive efforts to round up the illegals who are already here.

Our problem with terrorism comes from Muslims. It doesn't come from atheistic Europeans or Hindu Indians or Zoroastrians or Buddhists or Chinese engineers or Japanese business executives. We do not need Muslim immigrants. Letting in Muslim immigrants or Muslim visitors does not improve our society. If we didn't let in Muslims we wouldn't need to worry about their overstaying visas. Until we adopt immigration and visa policies aimed at keeping out the Muslims proposals like a visitor ID card will be just another political gimmick sold by political candidates to the rubes.

What US generals see, however, is a close ally preparing to "cut and run", leaving behind a city in the grip of a power struggle between Shia militias that could determine the fate of the Iraqi government and the country as a whole. With signs of the surge yielding tentative progress in Baghdad, but at the cost of many American lives, there could scarcely be a worse time for a parting of the ways. Yet the US military has no doubt, despite what Gordon Brown claims, that the pullout is being driven by "the political situation at home in the UK".

A senior US officer familiar with Gen Petraeus's thinking said: "The short version is that the Brits have lost Basra, if indeed they ever had it. Britain is in a difficult spot because of the lack of political support at home, but for a long time - more than a year - they have not been engaged in Basra and have tried to avoid casualties.

"They did not have enough troops there even before they started cutting back. The situation is beyond their control.

"Quite frankly what they're doing right now is not any value-added. They're just sitting there. They're not involved. The situation there gets worse by the day. Americans are disappointed because, in their minds, this thing is still winnable. They don't intend to cut and run."

Two generals told The Independent on Sunday last week that the military advice given to the Prime Minister was, "We've done what we can in the south [of Iraq]". Commanders want to hand over Basra Palace – where 500 British troops are subjected to up to 60 rocket and mortar strikes a day, and resupply convoys have been described as "nightly suicide missions" – by the end of August. The withdrawal of 500 soldiers has already been announced by the Government. The Army is drawing up plans to "reposture" the 5,000 that will be left at Basra airport, and aims to bring the bulk of them home in the next few months.

Some of the articles claim the US will have to send more forces to southern Iraq to protect the supply convoys coming up from Kuwait.

Civil war may escalate between Shia factions in southern Iraq. I figure the winning faction will either some day control all of Arab Iraq or at least will control the Shia Arab section of Iraq.

One US official said that recent US military intelligence reports sent to the White House had concluded that Britain had "lost" Basra, and that Pentagon war games were predicting a virtual civil war in the South once British troops left.

Which faction is going to win? Will that faction then take on other Shia factions in Baghdad in order to win control of the "central" government?

But in his outburst last autumn the head of the Army, General Sir Richard Dannatt, came close to implying that further British sacrifices in Iraq were pointless. He said the British presence was "exacerbating" the security situation and that the troops should leave "soon". Commanders argue that the majority of attacks in Basra are on British forces – between 85 and 90 per cent, they estimate – and point out that when Iraqi forces have taken over other British bases in Basra city, such as the Shatt al-Arab hotel, violence has fallen. "We are a major part of the problem," said one officer. "Without us the murder rate would be lower than in Washington DC."

Since the British presence is already so minimal do the Brits really restrain the factions at this point?

A MILITARY adviser to President George W Bush has warned that British forces will have to fight their way out of Iraq in an “ugly and embarrassing” retreat.

Stephen Biddle, who also advises the US commander in Iraq, said Iranian-backed Shi’ite militias in the south would try to create the impression they were forcing a retreat. “They want to make it clear they have forced the British out. That means they’ll use car bombs, ambushes, RPGs [rocket-propelled grenades] . . . and there will be a number of British casualties.”

The comments coincide with British military estimates that withdrawal could cost the lives of 10 to 15 soldiers.

The withdrawal from their base to the airport is expected to go well. But from the airport to out of the country is going to be a gun battle.

WHEN the British went into Iraq they were believed to have more expertise in counter-insurgency than their US allies still learning the lessons of humiliation in Vietnam.

But now they are facing their own “Saigon moment” with plans for a withdrawal predicted by some on the British side to be ignominious and by a US military adviser to be ugly and embarrassing.

Not only that, but the British are expected to rely on US troops for cover to protect their convoys.

The Brits never had enough troops. But then neither did the United States. The number of Iraqi youths willing to take up arms against the United States or against any government supported by the United States is so large that the US could only suppress the violence in Iraq with a draft to expand the US Army by a factor of 3 or 4.

We have no strategic interests at stake in Iraq. Al Qaeda isn't going to take over when we leave. The Kurds and Shia Arabs will see to that. Even the Sunni Arabs only wanted Al Qaeda to help them beat the Americans and Shias. We can leave and save huge amounts of money and many lives.

Scotland is the land of Scots. Scotland, you might think, exists for the Scottish who, btw, are overwhelmingly not Muslim. But the West has its internal enemies who want nothing better than to impose on us for the benefit of all the other cultures, religions, and ethnicities of the world. Scotland, a place whose rules used to be designed to be suitable for the Scottish, is starting to become hostile to the ways of the Scottish just like, for example, Rotterdam is becoming hostile to Dutch. Why? Islamic immigration made it possible for our enemies from within to use immigrant enemies to shaft us in ways petty and substantial. That immigration brings Muslims who expect non-Muslims to behave like Dhimmis. The Muslim immigrants serve as useful tools for Western leftist multiculturalist intellectuals who like nothing better than to screw over Western peoples. In Scotland medical workers aren't allowed to eat at their desks during the Ramadan holiday month of Islam.

TWO Scottish NHS trusts have decided all their staff should be banned from eating at their desks during next month's Ramadan when Muslims fast from dawn to dusk.

They will also be removing the vending machines and lunch trollies from their hospitals during the 30-day period.

That is just plain incredible. I eat at my desk to save time since I usually have too much to do. Surely like of Scottish NHS workers do the same. Why shouldn't they be allowed to do so?

Mary Scanlon, Shadow Cabinet Secretary for Health and Wellbeing in the Scottish Parliament said the move was a “step too far” for political correctness and unnecessary. “Scotland is a very tolerant, sensitive and welcoming country” but she added, “I don’t see it’s necessary for Ramadan to affect the lives of people of other beliefs,” she told Times Online, “It would be like saying Protestants shouldn’t eat meat next to Catholics who want to eat fish on a Friday.”

As we said, this is not an isolated case. While the Scottish NHS grovels before Islam, across the North Sea in Belgium the mayor of Brussels is refusing to let a group demonstrate on Sept. 11 — remember that date? — against the introduction of Sharia laws in Europe.

This is not Nazis marching on Skokie, Ill., but Europeans from Great Britain, Germany and Denmark who are alarmed by the Islamization of their homelands. They want to take their protest through the streets of Brussels to the European Parliament, where they will stop and honor the 9/11 victims with a moment of silence.

"At my professional development class for math teachers, I'm starting to hear the term "low confidence learners" as a euphemism for the d*mb kids.

Note how this teacher spells dumb: d*mb. Yes, dumb is a 4 letter word. No wonder we aren't supposed to call people dumb, no matter how dumb they might be.

"I think this is great! Having a euphemism for the single biggest reality that we teachers wrestle with everyday -- some kids are smarter than others -- means that at least the concept is officially thinkable. Before we had a euphemism, we had to pretend that everybody was equal in their math capabilities, which was hugely dysfunctional from a teaching standpoint in all sorts of ways, as you can easily imagine.

I think this is a great euphemism whose use should be promoted. We need a way to refer to dummies. I hope you will all do your part and find ways to refer to low confidence learners in everyday conversations.

Another related term used in educational circles: self efficacy. It is kind of like self esteem but with more of an educational branding. So "educators" can refer to self esteem while maintaining their distinct brand identification.

If reality can sneak in through euphemisms at least it can be discussed. Though we really need purer doses of reality in order to make sense of the world around us. I know very bright people who are closet realists about human nature and human biodiversity. Yet since they can't fully articulate their private thoughts they trip up and make mistakes in their reasoning that they wouldn't make if they could be more honest in intellectual discussions. Most of these people won't use ridiculous euphemisms either.

The more the poor regard themselves as lagging the rich (rather than doing better than, say, their peers back home in Gujarat), the more stupid risks they will take. That's why poor immigrants are more value-maximizing than the poor that have lived in America a long time and adapted to American norms and expectations. The immigrants don't regard their burdens as insuperable and they are on standard downward-sloping marginal utility curves.

Immigrant groups who do worse than the US average in education and achievements will have kids who will compare themselves to the middle and upper classes and become demoralized. The poor second and third generations who see no reasonable way up will take bigger risks and engage in more destructive behavior. The first generation immigrants who come Mexico or El Salvador will compare themselves to people in Mexico and El Salvador. Therefore they will feel relatively successful. But their kids will compare themselves to the average in America and feel woefully inadequate, frustrated, and very low status. They won't see long hours at menial jobs as the road to success. They'll see those jobs as the road to perpetual low status.

We should not allow in people who will do poorly. When we let such people in we are just creating a larger class of people at the bottom who will look upward resentfully at the people who earn more money than they do.

RIGHT-wing firebrand Pauline Hanson says she will run on similar policies to those that won her international notoriety a decade ago when she vies for a Queensland Senate seat at the upcoming election.

The main difference will be that this time the former fish and chip shop owner, who claims credit for forcing the Howard Government to adopt a harder line on immigration controls, will target Muslims.

"We need to have a look at our immigration levels and I'd like to have a look at putting a moratorium on any more Muslims coming into Australia," she said today.

"The Internet is the new Afghanistan," New York police chief Raymond Kelly said, as he released a New York Police Department (NYPD) report on the home-grown threat of attacks by Islamist extremists. "It is the de facto training ground. It's an area of concern."

The report found that the challenge for Western authorities was to identify, pre-empt and prevent home-grown threats, which was difficult because many of those who might undertake an attack often commit no crimes along the path to extremism.

While the threat from overseas remains, many of the terrorist attacks or thwarted plots against cities in Europe, Canada, Australia and the United States have been conceptualized and planned by local residents/citizens who sought to attack their country of residence. The majority of these individuals began as “unremarkable” - they had “unremarkable” jobs, had lived “unremarkable” lives and had little, if any criminal history. The recently thwarted plot by homegrown jihadists, in May 2007, against Fort Dix in New Jersey, only underscores the seriousness of this emerging threat.

Understanding this trend and the radicalization process in the West that drives “unremarkable” people to become terrorists is vital for developing effective counter- strategies. This realization has special importance for the NYPD and the City of New York. As one of the country’s iconic symbols and the target of numerous terrorist plots since the 1990’s, New York City continues to be the one of the top targets of terrorists worldwide. Consequently, the NYPD places a priority on understanding what drives and defines the radicalization process.

The aim of this report is to assist policymakers and law enforcement officials, both in Washington and throughout the country, by providing a thorough understanding of the kind of threat we face domestically. It also seeks to contribute to the debate among intelligence and law enforcement agencies on how best to counter this emerging threat by better understanding what constitutes the radicalization process.

Energy Secretary Sam Bodman said on Wednesday he wants OPEC to pump more oil as crude prices hover near record levels and he will push that message to the group's ministers ahead of their meeting next month.

"We're continuing to struggle with higher prices -- prices higher than either they or we would like -- so I think it's time for them to look at it," Bodman said to reporters. "That's all. I've encouraged them to do that."

US foreign policy toward the Middle East is shaped by two main influences: Israel and oil. Well, Nixon made Israel important to the US as a Cold War card to play against the Soviet Union. But the Soviet Union is a ex-parrot. Similarly, the Middle East is running out of oil. The biggest Saudi field, Ghawar, is probably post-peak. US foreign policy toward the Middle East is outdated, obsolete, lagging, trailing edge, and just plain dumb.

Mr. Greenspan explains: “We decided that in 2003 that though we judged the probability of severe deflation as small, were it to happen, its consequences were seen as devastating. So we chose to take out insurance against them, fully recognizing at the time that we were taking risks in the process. But central banks cannot avoid taking risks. Such tradeoffs are an integral part of policy. We were always confronted with choices.”

Some at the Fed argue its policy can’t explain the greater part of the housing and borrowing boom, which took place in 2005 and 2006 — after the Fed had moved short-term rates up considerably.

Mr. Greenspan agrees: “We tried in 2004 to move long term rates higher in order to get mortgage interest rates up and take some of the fizz out of the housing market. But we failed. We were overwhelmed by excess global savings that continued to press real long term rates lower.”

The Fed has a few tools for regulating money supply growth: Interest rates it charges to loan money to banks, Buying and selling securities, and setting of reserve requirements for some types of bank requirements (see here for a more detailed run-down of Fed money supply management tools). Greenspan is arguing either that those tools are not powerful enough (really?) or that a Fed policy designed to cut housing demand would have had side effects on the rest of the economy that would have been too costly. If he's arguing the second point then does he really mean it and is he right? If he's arguing the first point then he really could have taken the fizz out of the market but didn't think the benefit was worth the price.

My guess is that he's not being totally honest and his response is defensive. Yes, the Fed could have stopped the housing boom. Might have cost the economy a recession though. So he opted to hope the excesses would correct without too much cost a few years later. Well, we are waiting to find out if he was right.

US General Accounting Office Comptroller General David Walker thinks "dramatic" tax rises, large cuts in government services, and dumping of US government debt by foreign governments are possible elements of our national future. Walker says we are not on a sustainable path (true enough).

“One of the concerns is obviously we are a great country but we face major sustainability challenges that we are not taking seriously enough,” said Mr Walker, who was appointed during the Clinton administration to the post, which carries a 15-year term.

The fiscal imbalance meant the US was “on a path toward an explosion of debt”.

Current US policy on education, energy, the environment, immigration and Iraq also was on an “unsustainable path”.

Note that he includes immigration on the list of areas which are costing us. That's right. Low skilled, low wage illegal aliens use far more in services (e.g. we pay to subsidize their medical care and to try to educate their kids and to imprison the criminals among them) than they pay in taxes. They are net liabilities.

Mr Walker told The Times that foreign investors have more control over the US economy than Americans, leaving the country in a state that was “financially imprudent”.

He said: “More and more of our debt is held by foreign countries – some of which are our allies and some are not.”

If (or should I say when?) foreigners stop buying US debt then interest rates will rise quite a bit. We might find ourselves in stagflation with rising unemployment and rising inflation at the same time.

"The fact is, is that we don't face an immediate crisis. And, so people say, 'What's the problem?' The answer is, we suffer from a fiscal cancer. It is growing within us. And if we do not treat it, it could have catastrophic consequences for our country," Walker said.

"If nothing changes, the federal government's not gonna be able to do much more than pay interest on the mounting debt and some entitlement benefits. It won't have money left for anything else – national defense, homeland security, education, you name it," Walker warned.

Earlier in the year OMB estimated that revenues as a percentage of GDP would reach 18.5 percent in 2007. But as of a month ago that figure had reached 18.8 percent, approaching the levels that typically produce popular demand for relief. But as spending interests become stronger and more widespread in Washington, popular demand for lower taxes faces more resistance. It seems safe to conclude that George W. Bush will go down in history as the biggest taxer and the biggest spender ever.

So far this budget year, the biggest spending categories are programs from the Health and Human Services Department, including Medicare and Medicaid, $560.2 billion; Social Security, $516.1 billion; military, $437.7 billion; and interest on the public debt, $385.1 billion.

We should withdraw from Iraq to save money. The occupation of Iraq is a waste of money and lives. Also, we should start raising retirement ages for eligibility for old age entitlements and do means testing for eligibility. We should also stop and reverse the influx of low skilled workers. Stop adding more liabilities and get rid of some of those we already have.

Update: There's one other way to improve our fiscal position: Accelerate Education To Increase Tax Revenue, Reduce Costs. We can do this with technology such as prerecorded lectures and online tests to allow kids to learn at an accelerated pace all year long. We need standardized tests that allow kids and adults to earn credit and credentials without attending bricks and mortar colleges.

PARIS -- As European stocks continued a steep fall today, the European Central Bank announced a new injection of $83.9 billion into the banking system to try to calm markets agitated by a crisis in U.S. mortgage loans.

The move followed the Frankfurt-based bank's previous infusion of $130.7 billion into the system Thursday. The outlay is in response to a sudden leap in lending rates after a French bank, BNP Paribas, froze three funds dependent partly on American sub-prime loans.

In all, central banks in Europe, Asia and North America have pumped out more than $300 billion over 48 hours in an effort to keep money flowing through the arteries of the global financial system, hoping to prevent a credit market seizure that could imperil economies.

European financial institutions are taking big losses in American mortgage bonds.

The European sell-off began Thursday with an announcement by BNP Paribas, France's largest bank, that it was halting withdrawals from three hedge funds with a total value of about $2.2 billion that had exposure to U.S. subprime loans. The bank's shares were down 4.4 percent Friday.

Bear Stearns triggered a decline in the credit markets in June after two of its hedge funds faltered as default rates on home loans to people with poor credit rose. For subprime mortgages turned into securities, defaults hit a 10-year high.

The company pledged $1.3 billion to help stem losses in the funds. They filed for bankruptcy protection on July 31, two weeks after Bear Stearns told investors they would get little, if any, money back. The firm then blocked investors from pulling money from a third fund as losses in the credit markets expanded beyond subprime-mortgage securities.

Another European fund valued at 750m was frozen too, and a Dutch bank pulled its planned new listing after suffering subprime losses. Back across the pond, the Wall Street Journal reported that a second Goldman Sachs Group hedge fund is also suffering losses and selling positions due to subprime worries.

The same day, NIBC, a midsize Dutch bank, said the subprime snafu had contributed to a $189 million loss in one of its U.S. investment books in the first half of this year. And dodgy real estate loans have made a big dent in forecasted earnings this year at German lender IKB.

The problem is that if sub-prime is doing badly then there is a risk that no one wants to buy structured products of any type. And that's one of the main reasons why the equity markets are falling.

There has been a lot of leveraged buyouts in the US helping push up the value of equities, financed by debt and underwritten by American and European banks.

In recent years financial market commentators argued over whether we were in a housing bubble. Well, the current bubble popping sound we are hearing in the financial markets indicates that, yes, we really were in a big real estate bubble.

What's becoming clearer by the day is that we're watching the unraveling of a global real estate financing bubble. The U.S. subprime market is the heart of the problem, but financial innovation has spread the risk around the world in a way that wasn't possible a generation ago. Long-term assets -- real estate -- have been financed by hedge funds with short-term debt instruments, and the amount of the debt now exceeds the value of the collateral in these subprime investments. Somebody is going to have to swallow the difference, and the challenge for regulators in both the U.S. and Europe is to assist this debt workout while protecting an otherwise healthy global economy.

How much will financial institutions and their stock holders be made to suffer for their folly? On the one hand we do not want a credit crunch so severe that it causes a global depression. On the other hand, financial institutions need to be severely punished by markets when they make mistakes. Unfortunately, it was the central banks who let the real estate bubble happen in the first place. I'm not expecting the central banks to accurately calibrate their response to this crisis.

ANN ARBOR, Mich.—The rich really are getting richer and the poor are getting poorer, a new University of Michigan study shows.

The study—the most recent available analysis of long-term wealth trends among U.S. households—is based on data from the Panel Study of Income Dynamics, conducted by the U-M Institute for Social Research (ISR) since 1968.

Over the last 20 years, the net worth of the top two percentile of American families nearly doubled, from $1,071,000 in 1984 to $2,100,500 in 2005. But the poorest quarter of American families lost ground over the same period, with their 2005 net worth below their 1984 net worth, measured in constant 2005 dollars.

The poorest ten percent of families actually had a negative net worth—more liabilities than assets. The poorest 5 percent of American households had a negative net worth of a little more than $1,000 in 1984, compared to nearly $9,000 in 2005.

Does this effect hold up adjusted for race? White poor people are a rapidly dwindling percentage of the poor because blacks and especially Hispanics are increasing their proportions of the set of all poor people.

The average economic position of black householdsfell from 2003 to 2005. Note the shorter time period for this figure.

From 2003 to 2005, the average net worth of American families increased 12 percent, Stafford and Gouskova found. In constant 2005 dollars, overall average net worth, including home equity, rose from $275,600 to $309,600.

But during that period, the average net worth of African American households fell slightly, from $59,900 to $59,500. And the median net worth of households headed by high school drop-outs and by younger people, from ages 20 to 39, also declined.

Both white and black families had lower rates of participation in the stock market, but the rate of decline was stronger among black families. Slightly over six percent of black families owned stocks in 2003, compared with 5.3 percent in 2005—an 18 percent decline. Among white families, the percent owning stocks fell from 32 percent to 28 percent during the same period—a 12 percent drop.

People in their twenties are poorer than they used to be. But the college educated are making big gains.

The researchers also examined net worth dynamics across different age groups and educational levels. They found that the median household net worth of people in their 20s declined by nearly 30 percent, while the net worth of households headed by people in their 30s also fell slightly. The findings provide support for the widespread sense that it is harder than it used to be for younger people to establish themselves financially.

Those with some college education realized the strongest growth in family wealth. Their average net worth rose 31 percent during the period studied, to $341,700. College graduates showed a 10 percent rise in net worth, to $563,100 on average. But high school graduates showed only a modest increase in wealth, while the median wealth of high school drop-outs declined during the two-year period.

The smarter people can use increasingly powerful computers and other brain-enhancing tools to produce more and more. This makes brains more valuable in absolute and relative terms.

Andrew Vickers, Ph.D., of Memorial Sloan-Kettering Cancer Center in New York and colleagues analyzed data from 72 surgeons at four institutions and 7,765 of their prostate cancer patients treated with radical prostatectomies between 1987 and 2003. They measured surgeons’ experience by the number of times they had performed the procedure before each operation.

More surgical experience was associated with a greater likelihood that the patient’s cancer would not return after their operation. The learning curve for this procedure was very steep—there was dramatic improvement in patient outcomes as surgeons’ experience increased up to 250 operations, after which increasing experience had little influence on cancer recurrence. Patients treated by inexperienced surgeons (for example, those with 10 prior operations) were nearly 70% more likely to have evidence of recurrence of their prostate cancer within five years than those whose surgeons had performed 250 operations (17.9% vs. 10.7%).

Our medical industry ought to measure outcomes for all surgeons and other medical practitioners and publish track records. We ought to be able to pay more to get treated by doctors who score higher success rates.

An industry with big incentives to improve quality will find ways to produce better outcomes. Overall quality will rise.

Washington — Former House Speaker Newt Gingrich said Thursday the Bush administration is waging a "phony war" on terrorism, warning that the country is losing ground against the kind of Islamic radicals who attacked the country on Sept. 11, 2001.

A more effective approach, said Gingrich, would begin with a national energy strategy aimed at weaning the country from its reliance on imported oil and some of the regimes that petro-dollars support.

"None of you should believe we are winning this war. There is no evidence that we are winning this war," the ex-Georgian told a group of about 300 students attending a conference for collegiate conservatives.

We need technological innovations to end our need for oil. The development of ways to power cars without use of fossil fuels would yield many benefits including cleaner air and less cash for the Saudis to use to spread Wahhabi Islam. Better battery technology that can power cars long distances will reduce the threat from terrorism.

Update: We also need to simply keep Muslims out of the West. If they weren't living among us they couldn't try to set off car bombs, bus bombs, train bombs, and airplane bombs. But this simple and effective response is beyond the pale as far as the gatekeepers of political correctness are concerned.

SANGIN, Afghanistan — A senior British commander in southern Afghanistan said in recent weeks that he had asked that American Special Forces leave his area of operations because the high level of civilian casualties they had caused was making it difficult to win over local people.

Other British officers here in Helmand Province, speaking on condition of anonymity, criticized American Special Forces for causing most of the civilian deaths and injuries in their area. They also expressed concerns that the Americans’ extensive use of air power was turning the people against the foreign presence as British forces were trying to solidify recent gains against the Taliban.

American bombs are supposedly killing more civilians than the resurgent Taliban are. Makes us look bad to the locals.

On average, private forecasters have undershot their target by 31 percent each year, according to a recent analysis by Deutsche Bank. In the past five years, the price of a barrel of oil has tripled. The fact is, few experts saw it coming.

"If this market can continue going lower without OPEC disrupting it, it's very possible that by 2010 we could be substantially lower than anyone is imagining," said Peter Beutel, an oil analyst at the consultancy Cameron Hanover. "Four to 8 years from now, we could come down and break $20 a barrel."

The Department of Homeland Security is expected to make public soon new rules for employers notified when their worker's name or Social Security number was flagged by the Social Security Administration.

The rule, as initially drafted, requires employers to fire people who cannot be verified as a legal worker and cannot resolve within 60 days why the name or Social Security number on their W-2 doesn't match the government's database.

Employers who do not comply could face fines of $250 to $10,000 (€180 to €7,300) per illegal worker and incident.

My reaction is along the lines of "I'll believe it when I see it". Our political masters are not keen to stop the use of illegal alien labor. They've pretended to get tough in the past. Immigration has become such a huge political issue that their pretending is getting hard to do.

After first proposing the rules last year, Department of Homeland Security officials said they held off finishing them to await the outcome of the debate in Congress over a sweeping immigration bill. That measure, which was supported by President Bush, died in the Senate in June.

Now administration officials are signaling that they intend to clamp down on employers of illegal immigrants even without a new immigration law to offer legal status to millions of illegal immigrants already in the workforce.

The ongoing debate over illegal immigration in the U.S. is having some strange and unintended consequences in the West, where farmers facing acres of unpicked crops are replacing immigrants with inmates.

In Colorado, which last year passed some of the strictest immigration laws in the country, a new program aims to stem a severe labor shortage by using prisoners to work fields once farmed by migrant workers. In Arizona and Idaho, farmers are begging for the expansion of existing prison labor programs as states begin to target employers who hire illegal immigrants.

Great. Make people who are a financial drain on the rest of us do work that at least partially pays for the costs of their criminality.

But farmers who can't afford to pay market rates for labor should either get out of farming or automate their operations or switch to crops that require less labor. We are going to see a lot more farm automation as a result of vigorous immigration law enforcement.

And the very innovation that made mortgages so easily available — an assembly line process known on Wall Street as securitization — is creating an obstacle for troubled borrowers. As they try to restructure their loans, they are often thwarted, lawyers say, by strict protections put in place for investors who bought the mortgage pools.

This impasse could exacerbate the housing slump, pushing more homeowners into foreclosure. That would lead to a bigger glut of properties for sale, depressing home prices further.

“Securitization led to this explosion of bad loans, and now it is harder to unwind and modify them even where it is in the best interests of both the borrower and the investors,” Kurt Eggert, an associate professor at the Chapman University School of Law in Orange, Calif., said in an interview. “The thing that caused the problem is making it harder to solve the problem.”

Creating difficulties is the complex design of mortgage securities.

Some homeowners have problems simply identifying who holds their mortgages. Others find the companies that handle their loan payments, known as servicers, are unresponsive, partly because modifying loans cuts into profits.

Even if circumstances suggest fraud when a loan was made, lawyers say, the various parties protect each other by refusing to produce documents.

Beware financial institutions. They aren't fair. Though I'd make an exception if you can borrow hundreds of millions of dollars. That would change their incentives in dealing with you such that they'll take the time to think rationally about your relationship to them. Otherwise you'll just get processed according arcane rules designed simply to give them a lot more cards to play with you.

But Judith carries some distinctly un-Laura baggage. Like her husband, she has been married twice before. They also had a secret affair for a year before Mr. Giuliani announced it to the world — and to his second wife, Donna Hanover — at a news conference.

Her relations with Mr. Giuliani’s children by Ms. Hanover are by all accounts deeply strained, despite her efforts at rapprochement. And his son and daughter, ages 21 and 17, have said they do not plan to campaign for their father.

Sharply critical articles, most recently in Vanity Fair, have described Mrs. Giuliani as an imperious striver who shops extravagantly, demands a separate seat on the campaign plane for her Louis Vuitton handbag and has compiled a hit list of campaign aides she wants fired.

He'd have to get the nomination from Christian Republicans. Then he'd have to get some of those Christian Republicans to vote for him in the general election. I guess it depends on who the Democrats nominate. But his kids are down on him. He's married to his third wife who he started an affair with while still married to the second wife. Has America changed so much that he's got any sort of chance?

What he has going for him: He's not intellectual enough to turn off the mainstream voters because he's not that smart. Also, California moved up its primary date. So he might be able to get a bunch of delegates to the Republican convention early on and build momentum. But go on to win when married 3 times and to a woman who is also on her third marriage?

Some people are going to vote for Fred Thompson because he's old enough and seemingly content enough that he won't surprise us by, say, trying to convert the Arabs to democracy and he won't get divorced or have an affair. I'm guessing Romney's going to turn off most fundamentalist Christians due to his Mormonism.

Also, Hillary Clinton or Barack Obama? Or does a third Democrat even have a chance?

The unfolding catastrophe in Iraq has condemned the political judgment of a president. But it has also condemned the judgment of many others, myself included, who as commentators supported the invasion. Many of us believed, as an Iraqi exile friend told me the night the war started, that it was the only chance the members of his generation would have to live in freedom in their own country. How distant a dream that now seems.

Bush gets much more criticism for Iraq than a large number of other people who were just as supportive of this on-going debacle. A lot of people would rather direct their criticism at Bush for partisan reasons or because they don't want to admit their own errors. Kudos to Ignatieff for admitting how badly he got it wrong.

I started thinking the invasion was a bad idea when it became clear that the size of the invasion force seemed too small to occupy Iraq. Plus, I couldn't figure out how Saddam could have a substantial nuclear weapons development program more advanced than Iran's when Iran had far more money, engineers, scientists, and room for action. But I thought maybe our leaders knew somethings I didn't know. Among my lessons learned: No, our leaders don't know all that much. No, there's not much to the much vaunted Central Intelligence Agency. Sufficiently talented people do not want to work for the government. Yes, I should listen to my doubts. Also, question motives of people promoting agendas. Think of all the reasons why your interests and their interests differ.

Ignatieff believes you need to admit your mistakes.

Having left an academic post at Harvard in 2005 and returned home to Canada to enter political life, I keep revisiting the Iraq debacle, trying to understand exactly how the judgments I now have to make in the political arena need to improve on the ones I used to offer from the sidelines. I’ve learned that acquiring good judgment in politics starts with knowing when to admit your mistakes.

Ignatieff notes that some people (Greg Cochran comes to mind) predicted what would follow from an invasion. I think we should listen more to the people who make correct predictions. But I doubt any of the cable news channels give more time to the people who got Iraq right than they did before the invasion.

The people who truly showed good judgment on Iraq predicted the consequences that actually ensued but also rightly evaluated the motives that led to the action. They did not necessarily possess more knowledge than the rest of us.

Leave aside the people who are reflexively anti-war. They'll be wrong when the war is necessary and right when it is a dumb idea. Look at the people who tried to evaluate American national interest rationally. What they possessed was a far better understanding of what was knowledge and what wasn't knowledge. They had a better model of human nature (and, importantly, variations in human nature) and therefore a better model of what would take place as a result of an invasion of Iraq.

They labored, as everyone did, with the same faulty intelligence and lack of knowledge of Iraq’s fissured sectarian history. What they didn’t do was take wishes for reality. They didn’t suppose, as President Bush did, that because they believed in the integrity of their own motives everyone else in the region would believe in it, too. They didn’t suppose that a free state could arise on the foundations of 35 years of police terror. They didn’t suppose that America had the power to shape political outcomes in a faraway country of which most Americans knew little. They didn’t believe that because America defended human rights and freedom in Bosnia and Kosovo it had to be doing so in Iraq. They avoided all these mistakes.

He's misrepresenting the events in Bosnia and Kosovo. The US intervened in the Balkans in order to demonstrate to Muslims that we are not reflexively opposed to them in all circumstances. If Muslims produce more babies than an unimportant group like, say, Orthodox Christian Serbs then the US will sacrifice Serbian interests and territory to Muslims in order to try (in vain as it turns out) to win points with Muslims in the Middle East.

As for 35 years of police terror: Democracy isn't working in any Arab Muslim state. To attribute its failure in Iraq to 35 years of police state terror means that Ignatieff either still doesn't get it or doesn't want to say what he's really learned from Iraq. It is hard to tell which is the case. But my guess is he still doesn't understand since to understand the relevant facts in Iraq requires accepting taboo facts about human nature (e.g. group average differences in IQ and personality as well as the incompatibility between Islam and Western freedoms)..

We need a better way to keep track who gets stuff right in politics so that we know who to listen to on future issues.

The British branch of a world-wide radical Islamist group, Hizb ut-Tahrir, held a conference London on Saturday, in which speakers called for the overthrow of Muslim governments and their replacement with a single Islamic state, known as the caliphate. According to Hizb ut-Tahrir's website, "thousands" of people attended the conference.

Hizb ut-Tahrir - the Liberation Party in English - is active in dozens of countries, but has been banned in several Arab states, as well as European countries such as Germany and Russia. It is also illegal in China. In Britain, the organization is still legal, despite instances of the group's members and websites being found to promote anti-Semitic incitement to violence and calls for suicide bombings. In Australia, the organization is facing the prospect of a ban.

The British suicide bombers who attacked Mike’s Place in Tel Aviv in 2003 had Hizb ut-Tahrir contacts. Terrorist fixer Mohammed Babar (who turned and testified against the Crevice July 7 bombers) was a member. Shoe-bomber Richard Reid was influenced by HuT preachers. And Omar Bakri Mohammed, a former Hizb ut-Tahrir leader – now deported to Lebanon – believes that 7/7 was the fault of the British people and describes the 9/11 bombers as the “magnificent 19”.

And that is just in this country.

Across Europe, Africa, Asia and Australasia, HuT preaches a virulent brand of Islamic extremism. Senior Al-Qaeda leaders, including Abu Musab al-Zarqawi and Khalid Sheikh Mohammed, were members of HuT. Its UK website boasts that it is a “global party”, directly associating itself with the acts of its branches abroad.

In response to the recent attempted attacks in London and Glasgow, HuT confined itself to this general legalistic comment: “We reiterate our position that Islam does not allow the harming of innocent civilians.”

So were those targeted at Glasgow airport and the Haymarket “innocent” or “guilty” civilians? This deliberate ambiguity is telling.

How about deporting these people? Isn't their statements like nature's way of telling you that you face a threat to your lives and ought to take appropriate actions? Hello? The non-citizen Muslims could all be told to leave pronto. Then the citizen Muslims could be offered a buyback of their citizenship. This problem is solvable with sufficient will to solve it. Or do the British prefer "getting hit on the head lessons"?

Members of a radical Muslim group that Tony Blair promised to ban after the July 7 bombings have set up two schools in Britain to educate primary age children.

The Islamic Shaksiyah Foundation, a registered charity that runs private schools in Haringey, north London, and in Slough in Berkshire, was established two years ago by female members of the extremist group Hizb ut-Tahrir.

Yesterday Attorney-General Philip Ruddock signalled that authorities were looking at the Hizb ut-Tahrir group, which is currently legal in the UK and Australia.

Mr Ruddock was speaking after a Hizb ut-Tahrir defector from the UK, Ed Husain, warned Australian authorities to look at the group and said its leadership included a large number of doctors and engineers.

Ed Husain thinks there's a difference between Islam and Islamism. By contrast, ParaPundit thinks there's a difference between people who embrace the core beliefs of Islam and those who believe in watered down and impure variants of Islam. It is the believers in the diluted versions of Islam that do not want to dominate or kill non-Muslims.

TRIPOLI, Lebanon: There was a time when Omar Bakri Mohammed embodied every stereotype of the jihadi extremist. From his perch in London, he threw around words like "kafir" - infidel - to describe Christians and Jews and openly praised the bombers of Sept. 11, 2001.

But sitting recently in his new library overlooking Mount Lebanon in this northern city, with a bloody battle raging between the Lebanese Army and the Qaeda-inspired Fatah al Islam at a Palestinian refugee camp a few kilometers away, Bakri presented himself as a changed man. Whether the shift is as meaningful as he asserts is an open question.

He speaks of peace, decrying the unnecessary use of violence and emphasizing the sanctity of life.

I decry the unnecessary tolerance of Muslim violence in Western countries by Western rulers.

At their first meeting with journalists since taking over Russia's largest independent radio news network, the managers had startling news of their own: from now on, they said, at least 50 percent of the reports about Russia must be "positive."

In addition, opposition leaders could not be mentioned on the air and the United States was to be portrayed as an enemy, journalists employed by the network, Russian News Service, say they were told by the new managers, who are allies of the Kremlin.

How would they know what constituted positive news?

"When we talk of death, violence or poverty, for example, this is not positive," said one editor at the station who did not want to be identified for fear of retribution. "If the stock market is up, that is positive. The weather can also be positive."

The requirement that half the news be positive isn't as bad as the restrictions on what goes in the other half. There's very little real news reported in most of the Russian media. Putin has been able to get away with this in part because the Russians lack the sorts of beliefs that are needed to support a free society. Democracy is a failure in Russia. Democracy is not the aspiration of all peoples in the world and not all cultures contain the elements needed to support freedom. Russia should serve as a cautionary tale for neoconservative and liberal democracy imperialists.

The rulers in Russia have been able to get away with their crackdown in part because rising oil revenues have created greater prosperity. But Russia is near an oil production peak and eventually revenues will start declining. When living standards start declining will the media manipulations prove sufficient to allow the puppet democracy to remain in power? Time will tell.

Now that the boom has fizzled and foreclosure rates are rising, the important role of large homebuilders as lenders is also coming into sharper focus.

In addition to spitting out subdivisions, many of which now stand half-empty, builders jumped into the mortgage business to a degree they never had. Wall Street provided the same encouragement it offered other lenders. Even as the housing supply began to exceed demand last year, builders kept sales brisk by pushing adjustable-rate, interest-only, and other risky loans. In some cases they attracted clientele who couldn't afford conventional mortgages. In others, builders allegedly violated federal lending standards to get customers to sign on the dotted line. KB Home (KBH) paid a record $3.2 million settlement in July, 2005, to resolve allegations by the Housing & Urban Development Dept. that the builder's mortgage unit overstated borrowers' income, among other practices, to obtain loan approvals. KB, which denied wrongdoing, sold its loan business before settling.

"Homebuilders really started to push these more aggressive mortgages down the throats of potential buyers to boost sales," says G. Hunter Haas IV, who as head of mortgage research and trading for Opteum Financial Services (OPX) had an insider's perspective on the proceedings. Opteum has served as a middleman between Wall Street and builders. The Paramus (N.J.) firm provided developers with financing for their mortgage operations, then resold the loans to investment banks, which packaged them as securities and hawked them to hedge funds and insurance companies. The whole process added liquidity to the market and made it easier for developers to build and sell expansively.

I checked Opteum's ticker page and it was trading at its 52 week high of $8.94 a year ago and just closed yesterday at its 52 week low of $1.13. Yet another lender reeling from the big burst of the housing bubble. Opteum decided to get out of home loan brokering. Wall Street has seen such high default rates from builder-originated loans that Wall Street has decided builders who originate loans can't be trusted.

The article says the growth of big publically traded builders made the builder-originated loan craze possible. Wall Street sees publically traded hefty companies as big enough to do business with them.

Some home buyers are suing at least one large builder for falsifying so much loan data that the resulting foreclosures drove down the values on the homes of the people who were not foreclosed on. By this logic the whole country should sue the builders and the Wall Street financiers who provided the financing that created the loan bubble. As this bubble bursting plays out lots of people will lose jobs and the economy might go into recession. Surely that damages the interests of a substantial portion of the populace.

Sales of U.S. homes costing more than $10 million increased in the past year, said Kay Coughlin, president and chief executive officer of Christie's Great Estates in Santa Fe, New Mexico.

In San Francisco, 14 houses were sold for more than $5 million in the year ending in June, just one fewer than a year earlier. That suggests luxury homes there ``haven't taken any kind of hit'' amid the U.S. housing slowdown, said Andrew LePage of DataQuick Information Systems in La Jolla, California.

A newly constructed home near the Broadway property sold this year for $15.8 million. Another sold for $14 million, which was $1.5 million more than the asking price, said Moore of Alain Pinel.

A growing legion of rich people are bidding up the prices for prime real estate. It just is not fair. Poor people and the middle class are witnessing declining housing prices. But rich buyers get no break.

RIYADH: Inflation in Saudi Arabia rose to a five-month high of 3.1 per cent in June as food and housing costs climbed, official data showed yesterday.

The cost of living index rose to 104.4 points in June, up 0.2pc compared with May, the Central Department of Statistics said, without giving a comparative figure for June last year.

Those Saudi princes and the Saudi masses sure have it tough. They didn't ask the East Asians and Western countries to bid up the price of oil. Now they have lots of money they didn't expect to have and not enough stuff to buy with it.

On Tuesday, the Case-Shiller Home Price Indices revealed a 3.4 percent fall in its market basket of 10 U.S. cities in the past 12 months; San Diego prices plunged 7 percent. Those declines will have an effect on consumer spending, which accounts for 70 percent of the gross domestic product.

America still has debt problems, but as of this week the phrase "negative savings rate" no longer applies to the nation's household habits.

Through June of this year, US citizens have socked away $164 billion. Moreover, in releasing its annual revision of prior-year data, the Commerce Department now says that Americans earned more income than they spent in 2005 and 2006 – a reversal of prior tallies showing a negative savings rate for those years.

Why has the savings rate improved? The same reason housing prices are up for rich folks: Personal income increased so much for rich folks that they saved more than the poor folks spent.

Also troubling, McMillion says, is that much of the upward revision in personal income stemmed from greater interest and dividend income, not wages. That suggests that the savings picture has improved mainly for the best-off Americans, those with substantial financial assets.

Markets are driven by greed or fear. The greed phase has run so many years that people have begun looking for signs of the fear phase. The housing market and the oil market are both signalling reasons to focus more on fear. The oil market looks set to keep signalling louder and louder "fear, fear, fear".

DETROIT, Aug. 1 — Detroit auto companies’ grip on the American automobile market ended in July, when dismal auto sales gave foreign nameplates the lead for the first time ever, sales reports showed Wednesday.

The traditional American brands owned by General Motors, the Ford Motor Company and the Chrysler Group held 48.1 percent of the market in July, according to the Autodata Corporation, an industry statistics company in Woodcliff Lake, N.J.

That meant foreign auto companies held 51.9 percent of the market. Their previous high was in June, when they held 49.8 percent of automobile sales.

Note that the Big Three have wracked up huge losses the last couple of years even during a period of strong economic growth. Unless the United Auto Workers (UAW) relents and gives the US car companies big relief on labor costs one or more of them will end up filing for bankruptcy.

This time, David Cole, chairman of the Center for Automotive Research, sees Ford as the target.

"They will very likely go to Ford first so the pattern doesn't kill the weaker company," Cole said. "The union is very aware of the financial issues, and it will be a different kind of negotiations. They can't do anything to hurt the weakest company when it's so close to the edge of the cliff. They have to do something that helps keep Ford in the game."

Ford's fragile condition, he said, "reinforces the urgency" that the UAW needs to make more concessions on issues such as health-care costs and retiree benefits. The domestic carmakers contend that those benefits are the main reasons their manufacturing costs of about $75 an hour are $30 more than those at Japanese plants in the United States.

My guess is that large chunk of the UAW's membership rationalize that they are not to blame for the decline in the US auto industry. Therefore even if the union's leaders recognize they are driving the US automakers out of business than the membership wouldn't ratify any contract that cut salaries and retirement benefits enough to allow the Big Three to reverse their fortunes before they reach bankruptcy court.

Once the automakers file for bankruptcy they'll be able to dump tens of billions of dollars of retirement benefits liabilities and maybe even stop using union labor when they emerge from bankruptcy.

The reason this tragedy has dragged on for so long is that the shareholders don't want to accept total loss. The non-union employees of the car companies and the domestic suppliers would benefit from a bankruptcy because with lower manufacturing labor costs they could probably compete and even gain marketshare. But the shareholders, forced by the US government into disastrous contracts with the UAW, keep pushing management to find some tactics and strategy that will bring success in spite of the UAW contracts.

What is surprising about this saga is just how long the US car companies have managed to last given their competitive environment. Look at domestic manufacturers in many other industries. The US auto industry has done much better than many other domestic manufacturing industries and has lasted longer. Not only do US car makers compete with foreign makers who have lower costs but US car company labor costs are much higher than blue collar manufacturing labor costs in other American industries. So management and the engineers in Ford, GM, and Chrysler must have come up with many design and manufacturing innovations to allow them to stay in the running for this long.